Wednesday, 10 June 2009 10:40

New Chrysler Emerges, New Chair, Board, and Structure

UAW retirement fund now majority owner of Chrysler

Chrysler and Fiat announced June 10 that the two automakers have finalized their strategic alliance, forming  Chrysler Group LLC to be headed by Fiat's CEO Sergio Marchionne.  Marchionne is a lawyer with both Canadian and Italian citizenship. Robert Kidder, an engineer and a former CEO of battery maker Duracell and consultant to Ford,  is to be named chairman.

Chrysler Group LLC, will be owned 20% by Fiat, 9.85% by the U.S., 2.46% by Canada and 67.69% by a United Auto Workers union retiree health care trust fund.

"This is a very significant day, not only for Chrysler and its dedicated employees, who have persevered through a great deal of uncertainty during the past year, but for the global automotive industry as a whole," Marchionne stated.

"We intend to build on Chrysler's culture of innovation and Fiat's complementary technology and expertise to expand Chrysler's product portfolio both in North America and overseas," Marchionne said in an email to employees. 

"Those Chrysler operations assumed by the new company that were idled during this process will soon be back up and running, and work is already underway on developing new environmentally friendly, fuel-efficient, high-quality vehicles that we intend to become Chrysler's hallmark going forward."

"From the very beginning, we have been adamant that this alliance must be a constructive and important step toward solving the problems impacting our industry," said Marchionne. "We now look forward to establishing a new paradigm for how automotive companies can operate profitably going forward."

"The new company moves forward with significant strategic advantages, including a healthy balance sheet, a competitive cost structure, a leaner and more efficient dealer network, sound supplier agreements and significantly improved product quality and operational efficiency," Mr. Marchionne added.

Former CEO Bob Nardelli will retire to take a position with Cerberus Capital Management, Chryser's former majority owner.  Nardelli told employees in a memo that he is confident the automaker can bounce back under the new management team. "With the appointment of a new board of directors and the selection of Bob Kidder as Chairman and Sergio Marchionne as CEO, I am confident that Chrysler will continue to build on its proud 85-year heritage and remain an integral part of American life for many years to come," Nardelli wrote.

Fiat will maintain a 20 percent stake in the company, but can increase that up to 35 percent incrementally. Fiat cannot take majority ownership until all taxpayer funding is repaid. United Auto Workers' Retiree Medical Benefits Trust has been issued majority ownership (55%) of the company, while the U.S. Treasury and Canadian Government will own a combined 10%.

The board will consist of three Fiat-appointed directors, four appointed by the U.S. government, one from the Canadian government and one from the UAW.

The government will loan the new company $4.7 billion, to be repaid within eight years along with interest and $288 million in fees. "This morning's closing represents a proud moment in Chrysler's storied history," said the Treasury Department in a written statement. "The Chrysler-Fiat Alliance has now exited the bankruptcy process and is poised to emerge as a competitive, viable automaker."

The Treasury had given Chrysler LLC $3.3 billion in debtor-in-possession financing to support the company throughout the bankruptcy process. Chrysler LLC remains in bankruptcy court, as it winds down operations, selling plants it doesn't want, dispersing payments to debtholders and settling any other claims that were not transferred to the new company.

 

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